Capital Structure and Corporate Financial Distress of Quoted Non-Financial Firms in Nigeria

Abstract

The research examined the impact of capital structure on corporate financial distress in Nigerian publicly traded companies. It looked precisely at how financial leverage, debt maturity, equity structure, and asset structure effect company financial crisis. The longitudinal or panel research design was used in the study. The sample comprised of 89 non-financial enterprises listed on the Nigerian Exchange Group (NXG) between six financial years (2014-2019). The secondary data was derived from the selected firms’ published annual reports and accounts. Descriptive statistics, correlation analyses, and panel regression analysis were used to analyse the data. The research found that leverage and asset structure had a substantial impact on the financial distress of business organisations. The equity structure, which is a mix of external and internal equity, has a negative significant with a negative negligible influence on company financial hardship, while debt maturity has an insignificant effect. The report suggests, among other things, that the management of Nigerian listed corporations guarantee that the quantity of debt financing in the firm’s financial mix is at an appropriate level in order to maintain proper asset utilisation. It was also suggested that enterprises in Nigeria should not rely primarily on stock financing, and that management should seek other means of funding, which may not be in the best interests of equity holders. As a result, managers should use the financial debt asset ratio in a manner that increases value for their company’s owners, resulting in higher returns to equity holders.